A woman rides a motorcycle past Vinalines headquarters in Hanoi September 5. The former chairman of Vietnam's biggest state shipping firm has been arrested abroad with the help of Interpol after more than three months on the run, Vietnamese authorities said on Wednesday. The company faces scrutiny over corruption and debts. Photos: Reuters

The ex-head of state-owned Vietnam National Shipping Lines (Vinalines) was arrested Tuesday but it is unclear how and where he was caught after he fled the country three months ago.

Duong Chi Dung, 55, is accused of "deliberately violating state economic regulations causing serious consequences" when he chaired Vinalines between 2005 and February this year before he was appointed as director of Vietnam Marine Administration.

"The Ministry of Public Security's investigation department arrested Duong Chi Dung on September 4, after a time of facilitating search measures under directions by the central government, the prime minister, the public security minister and relevant agencies," according to a statement on the government website on September 5.

On May 18, ministry investigators entered Dung's house in Hanoi in a failed attempt to apprehend the senior official. Subsequent investigations found he had fled his home the previous day, investigators said.

On the same day, police arrested two other Vinalines executives - Mai Van Phuc, former general director, and Tran Huu Chieu, former deputy general director.

On July 25, police arrested Bui Thi Bich Loan, former chief accountant of Vinalines for her alleged connection to financial irregularities at the shipper.

Violations

The government ordered an investigation into Vinalines after state inspectors announced they had found evidence of several irregularities and fraud committed by company officials between 2007 and 2010, including the purchase and inefficient use of old ships.

The company incurred losses of more than VND2.6 trillion (US24.7 million) last year and VND1.2 trillion in 2010, but falsely reported profits.

A government report in early June said the corporation was in a "very difficult" financial situation with debts of more than VND43 trillion (more than US$2 billion).

According to government inspectors, Vinalines had "violations" at most of its 14 construction projects between 2007 and 2010.

It was also found mismanaging its 154 ships, most of them cargo vessels and oil tankers. One outstanding example was the purchase of an unusable 43-year-old floating dock from a Singaporean company for $9 million. The dock's repair work raised the cost to $26.3 million, about 70 percent of the price of a new dock.

The company also built three ship repair facilities between 2007-2010 that were not included in a government-approved development plan.

Losses have also been incurred from the purchase of 73 second-hand ships, including 17 described in an official report by government inspectors as "too old."

Inspectors said the chairman and general director of Vinalines between 2007-2010 were directly responsible for the violations.

Flight and arrest

Duong Chi Dung, 55, former chairman of Vietnam National Shipping Lines (Vinalines) was arrested on September 4 after more than three months on the lam. He is being investigated for wrongdoings at the state-owned shipper that incurred massive losses between 2007-2010.

Duong Chi Dung's detainment came two weeks after Prime Minister Nguyen Tan Dung instructed relevant agencies at a mid-year meeting of the Central Anti-Corruption Committee to facilitate the investigation and told them they "must arrest" the hunted Vinalines' ex-chairman.

In its Wednesday statement, the public security ministry said it had "patiently" persuaded Dung's relatives to urge Dung to turn himself in to the police to no avail.

The ministry did not state how and where Dung was arrested.

Several local newspapers reported that he was caught in "an ASEAN country" and was being extradited to Vietnam.

Meanwhile, Petrotimes, an online newspaper owned by the PetroVietnam Oil and Gas Group, cited an unnamed source as saying that Dung was arrested in Cambodia and the detainment was made on September 3, not September 4.

The public security ministry said it is calling for people who aided and abetted Dung to turn themselves in to police for lenient punishment.

Earlier, during a parliamentary session on June 14, the minister of public security Tran Dai Quang said his ministry was investigating whether or not a leak had prompted Dung to flee before his apprehension in the case.

At a regular government meeting on September 5, Minister Vu Duc Dam said Prime Minister Nguyen Tan Dung had issued what he called a "strict warning" that the Ministry of Public Security must identify the people who had helped Dung flee.

"Dung fled because the Ministry of Public Security was not strict enough in carrying out the [detainment] plan," he said.

Governmental credibility

Observers said the arrest of Dung is a good sign of anti-corruption efforts by Vietnam's government and that they were eager to see how the rest of the case is handled.

"There have been so many rumors [about the significance of the arrest]. But it certainly helps the government's credibility by just a little," said David Koh, a Vietnam analyst at the Institute of Southeast Asian Studies in Singapore.

"Credibility is only strong when people who have committed crimes are punished, and those who did nothing wrong are let go," he told Vietweek.

Koh said the government's credibility would increase more with a long, sustained campaign against corruption, a fundamental change to the management regime, and sustained reforms.

Jonathan Pincus, dean of the Fulbright Economics Teaching Program in Ho Chi Minh City and a former Vietnam economic specialist at the United Nations, said Vietnam's state-owned enterprises have easy access to capital and the fact that they are not investing efficiently can be attributed to either corruption or bad investment decisions.

"These are public firms that act on behalf of the citizens of Vietnam, and they must be held accountable to the public. The public has the right to full information about their activities," Pincus said, adding that there should be better governance, full forensics by independent accountants and the appointment of independent directors.

"The appointment of managers must be solely on the basis of ability and experience and not based on political and personal connections," he said.